Food inflation continues to accelerate (PPC)
The food and beverages category CPI increased 9.7% in May, accelerating from 9.0% in April. The food at home CPI increased 11.9% YOY in May, the highest rate of increase since 1979, accelerating from 10.8% in April. Fats & oils led the major categories with a 16.9% YOY increase, accelerating from 15.3% in April. Dairy increased 11.8% YOY, accelerating from 9.1% in April. Alcoholic beverages had the smallest YOY increase at 4.0%, accelerating from 3.9% in April. The meat, poultry, fish and eggs category had a 14.2% YOY increase and was the only major category to see sequential deceleration from 14.4% in April. Notable grocery items with high inflation in May included eggs +32.2%, butter and margarine +20.2%, chicken +17.4%, milk +15.9%, and ground beef 13.6%. Hormel said the prices for corn meal and soybean meal for livestock were up 125% and 40% respectively early in May. That is a major driver behind boneless, skinless chicken breast prices being up 68% since the beginning of the year. At the current rate of inflation June will be another month of accelerating food at home price increases before the base effects have a step change in July.
Inflation by channel (KR)
The CPI measure of inflation is broad. Consumers experience different rates of inflation depending on where they shop and what they purchase. According to Numerator online grocery had the highest rate of inflation in May at 22.5%. Dollar stores had food inflation of 19.5% and grocery stores had inflation of 12.9%. The mass stores had inflation of 13.7%. The lowest level was in the warehouse clubs which had food inflation between 6.9% and 8.2% YOY. Middle income households had the highest rate of food inflation at 15.2%. Gen Z had the highest rate among age demographics with inflation accelerating from 14.3% in the beginning of May and 19.8% by the end of May. Online grocery has the most associated expenses so it is not surprising it has the highest rate of inflation. Being the highest will be a headwind for future share gains.
Truck rates fall (UTZ)
Container imports bound for the U.S. have dropped over 36% since May 24. Since the ocean transit time is roughly a month, volumes at U.S. ports will weaken in the first half of July. The cost to move a container from Asia to a major port in Europe and North America has fallen 23% since the beginning of the year according to Drewry. According to Freightos spot rates have fallen further. Spot rates from China to the West Coast have declined 38% month over month. The drop in activity in ocean freight has led to a drop in trucking activity and rates. 17% of U.S. truckload volumes are tied to imports. DAT’s load to truck gauge for van shipments fell 28.3% in May compared to the prior year. Spot van trucking rates have fallen 31% since the beginning of the year. In May, spot rates were nearly flat compared to the prior year as seen in the following chart.
Contract rates were up 23.8% YOY on average in May. The spread between spot rates and contract rates has widened to 83 cents per mile. In 2019 the spread was about 45 cents in comparison. Fuel prices were up 73.2% YOY. Not all truck rates have fuel surcharges making the runup in fuel hit the truckers. If fuel surcharges do not cover the cost of the fuel increase drivers will be leaving the industry.
